Wealth review

Which of the following is an advantage of using an online brokerage firm: A. 24-hour account access B. Personal guidance from a live broker C. Additional financial products and services D. High commissions

A 24-hour account access. One of the advantages of using an online brokerage firm is 24-hour access to your account. Many self-directed investors like being able to access this information at any time without having to call or visit their broker. Online brokerages do not offer personal guidance from a live broker or many additional financial products and services. Online brokerages usually have low commissions rather than high ones. SOURCE: FI:075

Patrick wants to keep a certain amount of his money in a safe place in which he can earn interest on his savings, and also be able to withdraw his funds without experiencing sizable financial penalties. In what type of financial institution should Patrick consider placing his money? A. A retail bank B. The stock market C. A retirement fund D. A holding company

A A retail bank. Retail banks provide a variety of financial services, including savings and checking accounts for individuals. Opening a savings account with a properly insured bank will provide Patrick with a safe place to keep his money, and he will earn interest on the money that he places in his savings account. Patrick will also be able to remove money to pay bills without incurring the financial penalties he might experience if he borrowed money from his retirement fund. Investing in the stock market involves risk; however, Patrick may earn dividends on stocks that perform well. A holding company (parent company) is a business that owns the majority of another company's shares of stock.

With a lending investment, investors do which of the following: A. Allow borrowers to use their money for a price B. Hire a financial advisor C. Maintain a minimum amount of money in the investment D. Avoid taking any risk

A Allow borrowers to use their money for a price. With a lending investment, investors allow borrowers to use their money for a price. The extra money received provides the motivation for lending. With any investment, an investor might decide to hire a financial advisor. No investment avoids risk altogether. Money market accounts (specific lending investments) sometimes require investors to maintain a minimum amount of money in the investment.

Which of the following explains what credit is: A. An arrangement to buy now, pay later B. A legal claim to an item of property C. The amount charged for use of a credit card D. The amount due after a partial credit payment

A An arrangement to buy now, pay later. Credit is the arrangement by which businesses or individuals can purchase now and pay later. Businesses use credit to obtain goods and services to sell, and consumers use credit to purchase those goods and services. A legal claim to an item of property is a lien. It protects the seller if the buyer does not complete his/her payments. An annual fee is the amount of money charged on a yearly basis for the privilege of using certain kinds of credit such as a bank card. The outstanding balance is the remaining amount that is owed to the creditor after the credit user has made a partial payment on his/her account.

To encourage customers to use their Macy's credit card, Macy's often offers a 20% discount for charges on its card. In economics, what does the 20% discount represent? A. An incentive B. The Cost-of-Doing-Business Index C. A limited resource D. An institution

A An incentive. Incentives encourage people and institutions to function in their own best interest. Therefore, a discount lets customers know that they have to give up less money to obtain the things they want. The Cost-of-Doing-Business Index is prepared annually by the Milken Institute and identifies each state's comparative advantages or disadvantages in attracting and retaining businesses. The Index measures wage costs, taxes, electricity costs and real estate costs for industrial and office space. An institution is a humanly devised constraint that structures human interactions. Examples of institutions are laws, rules, codes of conduct, etc.

Darron is investigating a few corporate bonds for investment. He wants to know how likely it is that the corporations will pay back what they've borrowed. Darron needs to look at the A. bond rating. B. liquidity. C. issuer. D. coupon rate.

A Bond rating. Darron needs to look at the bond rating—the ranking that shows how likely it is that an issuer will repay the bond. Liquid investments are ones in which the investor has immediate access to the invested funds. The issuer is the corporation or governing body "issuing" the bond, or borrowing the money. The bond's interest rate is its coupon rate.

Saving the money that you might ordinarily spend each day on a cup of coffee and a donut A. can help you achieve larger financial goals. B. will not result in significant savings. C. is the sacrifice you must make for future financial security. D. is not a practical step in reaching your financial goals.

A Can help you achieve larger financial goals. Making purposeful spending decisions, instead of spending out of habit or impulsively, is an important step in achieving larger financial goals. Even small daily savings add up to significant amounts over time. Day-to-day spending does not have to be sacrificed entirely for future financial security, as long as you're aware of your spending and are making purposeful decisions. Small savings every day are a very practical step in reaching your financial goals.

What is the first step Cameron should take to protect himself from identity theft after he loses his wallet? A. Cancel all of his credit and debit cards B. Contact the appropriate government agency to replace the credit cards C. Advise the proper law enforcement authorities about the loss D. Change the passwords for his online banking accounts

A Cancel all of his credit and debit cards. Identity theft occurs when somebody uses another individual's name and personal information (e.g. credit cards) for fraudulent purposes. The first thing Cameron should do when he realizes he has lost his wallet is to cancel his credit cards. By canceling the credit cards, Cameron will protect himself in the event that someone finds his wallet and attempts to use the credit cards. Financial institutions and businesses (e.g., retailers) issue credit cards, not government agencies. Cameron should contact the proper law enforcement authorities (e.g., police) if he thinks his wallet is stolen. He can report a lost wallet, and he can also change the passwords for his online banking accounts. However, the first thing he should do is to cancel his credit and debit cards.

Which of the following is a wise precaution to take when using online banking and bill pay: A. Change your account passwords every 30 to 60 days. B. Use only lower-case letters in your account passwords. C. Utilize the same password for multiple online accounts. D. Base your account passwords on your name or birthdate

A Change your account passwords every 30 to 60 days. To protect yourself from hacking and online scams, you should change your account passwords every 30 to 60 days. Whenever possible, use a combination of upper- and lower-case letters as well as numbers and symbols in your passwords to make it more difficult for people and/or machines to guess them. Rather than using the same password for multiple online accounts, it is wise to use a different password for each account. That way, even if one account is compromised, hackers will not be able to access your other online accounts. You should not base your account passwords on your name or birthdate because those are among the first passwords that hackers often use to try to get into your online accounts.

Which of the following is a type of financial-services provider: A. Commercial bank B. Stock market C. Taxation department D. Retirement community

A Commercial bank. A commercial bank provides a variety of financial services to individuals and businesses. Besides providing savings accounts and other savings options, banks also make loans and offer credit cards. Many large banks have trust departments and help individuals plan for retirement. Depending on the size of the bank, it may be possible to obtain all necessary financial services from that institution. The stock market itself does not provide financial services. A taxation department collects various types of taxes. A retirement community provides housing rather than financial services.

One of the reasons that businesses and consumers use credit is because it provides A. convenience. B. reassurance. C. interest. D. collateral.

A Convenience. Credit allows businesses and consumers to pay for several different purchases at one time with a single payment. It reduces the need to carry cash and provides the convenience of ordering by telephone. Collateral is anything of value belonging to the borrower which is pledged to the lender to guarantee that the loan will be repaid. Interest is the fee which lenders charge borrowers for the use of credit. Credit does not provide reassurance, or comfort.

Which of the following is a possible consequence of having one's identity stolen: A. Damage to credit history B. Need for new identity C. Unemployment D. Homelessness

A Damage to credit history. If steps are not immediately taken to rectify any damages caused by identity theft, the victim of the theft could spend years trying to rebuild his/her credit and savings. If one's identity is stolen, s/he will not need to get a new identity. Unemployment and homelessness are not results of having one's identity stolen.

What can you do to cope with volatile financial markets? A. Diversify your investments. B. Invest in a single, quality stock. C. Invest in dividend-paying stocks. D. Maximize the amount of money put into savings.

A Diversify your investments. When you diversify your investments, you keep from putting "all of your eggs in one basket." This helps to overcome the weaknesses in one type of investment with the strengths in another type of investment. Investing in one, quality stock exposes your investment to risk that diversification would not encounter. Investing in dividend-paying stocks is a wise choice when income is needed from investments. Otherwise, it's better to invest in growth stocks. Maximizing the amount of money put into savings often will not keep pace with the rate of inflation, thereby keeping you from being able to cope with financial market volatility.

For an investment to yield positive results at the end of the investment period, the earnings should A. exceed the rate of inflation. B. grow by at least ten percent. C. be accrued on a debt security. D. be documented appropriately.

A Exceed the rate of inflation. When making investments, it is important to consider the time value of money, which is the difference between the money's current purchasing power in relation to its purchasing power at a future date. Earnings from investments can come in different forms, such as accumulated interest from debt securities or dividends from equity securities. At the end of the investment period, a successful investment will yield more money than the investor started with. However, it is important to consider the rate of inflation—which is an increase in prices of goods and services. If inflation increases more rapidly than the investment earns (e.g., 10%) during the investment period, then the value of money earned will not yield the desired results. Documents and forms do not affect the time value of money.

Which of the following best describes the relationship between bonds and the stock market: A. Inverse B. Straight C. Liquid D. Beneficial

A Inverse. Bonds are inversely related to the stock market. When the stock market rises and stocks earn more interest, the price of bonds falls. "Straight" describes a bond that is paid at its maturity date—it's not repaid early, as with a callable or puttable bond. Liquid investments are ones in which the investor has immediate access to the invested funds. Beneficial is a description of something that is helpful. Bonds may be helpful to investors, but the word "beneficial" is not an accurate description of the relationship between bonds and the stock market.

Which of the following web sites is most likely to contain accurate, trustworthy securities information: A. Morningstar B. Wikipedia C. StandardLine D. Facebook Finance

A Morningstar. Morningstar is an independent company that provides up-to-date, reliable information and analyses of a variety of securities, including stocks, bonds, and mutual funds. Although Wikipedia contains a wealth of information, it is less likely to be accurate or trustworthy because the content is primarily provided by anonymous Internet users. StandardLine does not provide financial information. Facebook Finance is a fictitious web site.

On his way home from work, Jason stops at the gas station to buy a magazine and a pack of gum. The magazine and gum are examples of _________ expenses. A. non-essential B. essential C. fixed D. variable

A Non-essential. The gum and the magazine are extras. An example of an essential expense would be paying the rent or car loans. Rent and car loans are also examples of fixed expenses. Variable expenses are also essential expenses, but they vary from month to month. Some examples are heating and electric bills, and gasoline.

What is associated with every choice you make due to limited resources? A. Opportunity cost B. Money C. Institutions D. Positive incentives

A Opportunity cost. Due to limited resources when you make choices, you opt for one thing over others. The opportunity cost is the value of the next best option that you forgo when making choices. Money and positive incentives do not have to be associated with your choices. Institutions are humanly devised constraints that structure human interactions. Examples of institutions are laws, rules, codes of conduct, etc.

Which of the following could estate-planners do to reduce estate taxes for their beneficiaries: A. Pay a hospital for their grandkid's medical expenses B. Prepare a Power of Attorney document C. Write a will D. Identify the executor of their estate

A Pay a hospital for their grandkid's medical expenses. Tax law allows you to pay for your children's or grandkid's education or medical expenses as long as you write the check directly to the college or hospital. Preparing a Power of Attorney document designates the person who can make financial decisions for you if you are declared incompetent. Putting your assets into a trust rather than writing a will reduces estate taxes for beneficiaries. The executor of an estate ensures that a deceased person's bills are paid and that estate documentation is filed properly.

Which of the following is the most effective way to pay bills off: A. Pay those with the highest interest rates first. B. Pay the smallest bills first. C. Pay the largest bills first. D. Pay those with the lowest interest rates first.

A Pay those with the highest interest rates first. Paying off the bills with the highest interest rates first helps to reduce the amount of interest a person has to pay on a debt. Paying off the smallest bills first may give a person an emotional charge for getting a debt out of the way; however, this might also be the bill with the lowest interest rate. Paying off the largest bills and those with the lowest interest rates first are not effective ways to pay bills off since both approaches will end up costing you more in the long run.

When completing a loan application, which of the following should you do: A. Request that credit bureaus not accept unauthorized credit checks. B. Close unneeded credit accounts to increase your available credit. C. Move your money from a savings account into a checking account that pays higher interest. D. Use a credit repair service to improve your overall credit score.

A Request that credit bureaus not accept unauthorized credit checks. Unauthorized credit checks show up on your credit report when your credit is checked for loans. These unauthorized credit checks occur when companies send out pre-approved credit-card offers that you have not requested. To keep these checks from happening, ask credit bureaus to accept only authorized credit checks. You should avoid closing any credit accounts when applying for loans. When accounts are closed or cancelled, potential creditors question whether there are problems with your credit accounts. Money should not be moved from one account to another. If money is transferred, creditors will require you to provide additional explanations before approving the loan request. Credit repair services should be avoided when applying for loans since their use is viewed as a potential red flag to creditors.

Which of the following statements about retirement is true: A. Saving even a little bit each month will help. B. You have plenty of time to start saving for retirement. C. You can depend on Social Security for your basic living expenses. D. You will be in retirement only about 15 years.

A Saving even a little bit each month will help. Even a small amount of money, invested from an early age over a long period of time, can make a significant contribution to retirement savings. People do not have plenty of time to save for retirement; beginning early allows more time for savings to grow. Social Security benefits are not likely to cover basic living expenses. Due to longer life spans, many people are in retirement longer than 15 years.

What type of loan requires collateral? A. Secured B. Unsecured C. Note D. Signature

A Secured. A secured loan is a loan in which the borrower pledges to the lender some valuable possession as security, or collateral, to guarantee that the loan will be repaid. Items often used as collateral include real estate, stocks, bonds, machinery, and the cash value of life insurance. An unsecured loan, also known as a signature loan, is an amount of money borrowed by an individual or a business simply by signing a promissory note to repay the loan. No collateral is required for this loan. Both secured and unsecured loans are considered notes.

Why do employers require new hires to complete a W-4 form? A. Shows employers how much federal tax to withhold from a person's paycheck B. Enables businesses to track down parents who owe child support C. Prevents new hires from committing unemployment fraud D. Helps the government determine whether employers are meeting established hiring quotas

A Shows employers how much federal tax to withhold from a person's paycheck. A new hire indicates marital status and number of exemptions to be claimed on the W-4 form. This lets employers determine the proper amount of tax to withhold from a new hire's paycheck. If a new hire fails to complete or completes the W-4 form inaccurately, too much or too little income tax will be withheld. The government rather than businesses use new-hire reporting information to track down parents who owe child support. The government also uses the new-hire reporting information to prevent new hires from committing unemployment fraud. The W-4 does not relate to hiring quotas. Also, there are no established hiring quotas that the government requires employers to meet.

For which of the following items would you save (rather than invest): A. Spring break B. Retirement C. Future children's college D. House

A Spring break. You would save money for spring break, rather than invest for it. Saving is important for reaching short-term financial goals, such as vacations. Investing is for reaching long-term financial goals, such as retirement, your children's college education, and home ownership.

How do buyers and sellers benefit when they're matched up by financial institutions? A. The costs of finding each other are lowered. B. The goals of certain interest groups are promoted. C. Costs and benefits of their decisions are passed on to them. D. Regulations become the responsibility of the financial institution.

A The costs of finding each other are lowered. Financial institutions act as intermediaries to match buyers and sellers. Both groups notify financial institutions that they want to do business. If buyers and sellers had to find each other, they would spend more money and exert more effort than using a financial institution as a match maker. Property rights help to ensure that people bear the costs and reap the benefits of their decisions. Labor unions are the institutions that promote the goals of certain interest groups. Meeting regulations cannot be passed off to the financial institution

What is good advice to follow to avoid excessive debt? A. Think long term and be realistic about income and expenses. B. Engage in impulse buying to avoid unmanageable debt. C. Notify creditors immediately when you know your payments will be late. D. Use co-signers on loans so that they can be held responsible for excessive debt.

A Think long term and be realistic about income and expenses. When taking on debt, you need to be honest about whether you will be able to repay the debt. You have to think about whether there are anticipated changes in your income and expenses over the life of the debt that would keep you from repaying it. Impulse buying creates unmanageable debt rather than avoids it. Debt payments must be made in a timely manner. If you anticipate that timely repayment will be a problem, don't consider taking on additional debt. Although co-signers may be needed to obtain a loan, you should understand that both your credit rating and that of the co-signers will be damaged by your late payment.

Why do some businesses sell bonds to investors? A. To obtain long-term capital B. To open a line of credit C. To borrow funds from a bank D. To finance accounts receivable

A To obtain long-term capital. Businesses sometimes issue bonds to obtain long-term capital or funds. Bonds are a type of long-term debt that a business repays at a specified time with interest. The benefit of selling bonds to investors is that the businesses have access to the funds for a long time before they must repay the investors. Businesses do not sell bonds to investors to open a line of credit, borrow funds from a bank, or finance accounts receivable.

Melissa writes checks to pay for her rent, utilities, and groceries, and she keeps a record of all these transactions in her check register. Keeping an accurate check register helps Melissa A. track the amount of money she has spent. B. determine when she needs to add funds to her savings account. C. understand the checking account's restrictions and fees. D. decide when to order new checks.

A Track the amount of money she has spent. A check is a negotiable instrument or bank draft made payable to a specific party for a specific amount of money. A check serves as a written promise to the check bearer that money is available in the issuer's bank account. Checks are a common form of financial exchange. Both individuals and businesses use checks to pay for goods and services such as rent, utilities, food, and supplies. When writing a check, an individual or business keeps a check register that records information about the transaction. This information includes the date the check is written, to whom the check is made payable, the amount of the check, and the check number. The register is a central location to record and track all of the checks written and the amount of money spent. Check registers do not help the check issuers determine when to add funds to a savings account, understand the checking account's restrictions and fees, or decide when to order new checks.

When Armand is comparing his checkbook balance with his bank statement, he must make sure that he has subtracted the ____________ from his checkbook. A. transaction fees B. accumulated interest C. payroll deposits D. check numbers

A Transaction fees. Reconciling bank statements involves comparing the entries in a checkbook with the entries listed on the bank statement. It is important to make these comparisons to determine inconsistencies and mistakes. If a check is not recorded correctly, and if the mistake is not caught, the individual runs the risk of having insufficient funds in his/her checking account, which results in bounced checks. Some financial institutions charge transaction fees for checking accounts, so it is important to make sure that those fees are subtracted from the checking account balance. Accumulated interest and payroll deposits are added to the checking account balance rather than subtracted from it. Check numbers are not subtracted from the checkbook when reconciling bank statements and checkbook balances.

One way money functions in society is that it helps people communicate a product's A. value. B. income. C. market. D. attributes.

A Value. Money is the most common medium of exchange in society. People exchange money for goods and services that they want. The price, or the amount of money a person is willing to pay for the product, communicates the product's value or worth. Income is money resource owners receive for supplying goods and services. Market is a customer or potential customer who has an unfulfilled desire and is financially able and willing to satisfy that desire. Attributes are a product's characteristics.

What is likely to be the result if you fail to set goals? A. You will waste a lot of time and effort. B. You will have a high level of self-esteem. C. You will focus your efforts in one direction. D. You will be better able to measure your progress.

A You will waste a lot of time and effort. Without goals, you may put out a lot of time and effort without getting ahead. Many people are unsuccessful simply because they haven't set goals for themselves. Setting goals focuses your efforts in one direction, gives you a way to measure your progress, and contributes to a high level of self-esteem.

On Samantha's first pay stub, she sees that her gross pay is $150.00, and her net pay is $125.00. When she cashes her check, she will have ________ that she could deposit into the bank account. A. $150.00 B. $125.00 C. $275.00 D. $25.00

B $125.00. Her net pay is what she actually receives after withholdings for federal, state and local income taxes and government programs. Her gross pay is $150.00, which is not the amount she will receive. $275.00 could be found by adding the gross pay to the net pay, but this number is meaningless. $25.00 could be found by subtracting her net pay from her gross pay, and would be the amount of her withholdings.

Tonya's grandmother loaned her $2,000 to help make the down payment on a used car. Tonya agreed to pay 5% simple interest on the loan and would repay the loan in 24 months. What is the total amount of interest Tonya will pay for the loan? A. $100 B. $200 C. $50 D. $150

B $200. To calculate the amount of interest Tonya will pay, multiply the loan's principal ($2,000) times the interest rate (5%) times the time (2 years). For this scenario, $2,000 X .05 X 2 equals $200 interest.

Determine personal net worth if you own and owe the following: Own: Car: $ 8,000 Engagement ring: $ 3,500 Investments: $45,000 Savings account: $12,500 Grandmother's antique china: $ 2,500 Owe: Student loan $35,000 Monthly apartment rental $ 600 Credit card balance $ 2,750 Utilities $250 A. $38,850 B. $33,750 C. $36,500 D. $36,250

B $33,750. Calculating your net worth involves comparing your assets with your liabilities (Assets - Liabilities = Net Worth). Your assets include savings accounts, cash savings, checking accounts, stocks, and mutual funds. It also includes assets such as a home, car, boat, antiques, and jewelry. Your liabilities don't take into account your annual expenses. For example, you would not include your monthly mortgage payment, your rent, or your utilities. Instead, you want to determine your outstanding short to long-term debt. For example, if you have a credit card, and you pay it off each month, that's not going to be considered a liability, because each month that goes to zero. But if you have a student loan that has an outstanding balance that you're paying off on a monthly basis over an extended period of time, then the balance due on that loan is a liability. Other examples of liabilities include the balance due on a mortgage, a student loan, a car loan, a boat loan, and personal loans that you owe to others. Total the value of your assets, and then total the value of your liabilities. Subtract your liabilities from your assets to determine your net worth. In this scenario, the total assets equal $71,500, while liabilities equal $37,750. The difference between the two results in a net worth of $33,750. Utilities and monthly apartment rental are considered expenses, rather than liabilities and would not be included in the total for liabilities.

Determine personal net worth if you own and owe the following: Own: Car $25,000 Boat $ 9,500 401K $33,000 Savings account $ 2,500 Jewelry $ 6,500 Owe: Student loan $85,000 Mortgage balance $65,000 Credit card balance $12,750 A. - $98,850 B. - $86,250 C. - $66,500 D. - $38,250

B - $86,250. Calculating your net worth involves comparing your assets with your liabilities (Assets - Liabilities = Net Worth). Your assets include savings accounts, cash savings, checking accounts, stocks, and mutual funds. It also includes assets such as a home, car, boat, antiques, and jewelry. Your liabilities don't take into account your annual expenses. For example, you would not include your monthly mortgage payment, your rent, or your utilities. Instead, you want to determine your outstanding short to long-term debt. For example, if you have a credit card, and you pay it off each month, that's not going to be considered a liability, because each month that goes to zero. But if you have a student loan that has an outstanding balance that you're paying off on a monthly basis over an extended period of time, then the balance due on that loan is a liability. Other examples of liabilities include the balance due on a mortgage, a student loan, a car loan, a boat loan, and personal loans that you owe to others. Total the value of your assets, and then total the value of your liabilities. Subtract your liabilities from your assets to determine your net worth. In this scenario, the total assets equal $76,500, while liabilities equal $162,750. The difference between the two results in a net worth of - $86,250. Utilities and monthly apartment rental are considered expenses, rather than liabilities and would not be included in the total for liabilities.

If you are 17 right now, what is the best age to begin investing? A. 32 B. 17 C. 27 D. 25

B 17. If you are 17 now, the best age to begin investing is 17! The sooner you begin to take advantage of the compounding growth of the stock market, the better. Compounding is your best friend, because right now, time is on your side. As a teenager, you have more years ahead of you to invest than your grandparents, your parents, and even your older siblings. Waiting until you're 25, 27, or 32 could cost you hundreds of thousands of dollars.

What is the best advice to follow to indicate responsible financial decision-making? A. Obtain the advice of a finance professional before making financial decisions B. Align your financial decisions with your life values C. Make financial decisions based on where you anticipate being financially in the future D. Ignore the consequences associated with financial decisions

B Align your financial decisions with your life values. To make responsible financial decisions, you need to determine what is important to you. Once you've figured that out, it's easier to make financial decisions that align with what you consider important—your life values. It's not necessary to obtain the advice of a finance professional every time you make financial decisions. You should make financial decisions based on where you are financially right now rather than where you anticipate being financially in the future. You need to assess the consequences of your financial decisions to avoid spending your money impulsively.

When should you record bank transactions in your check register? A. When bank statements are received B. As soon as each check is written C. As bank statements are reconciled D. When checks bounce

B As soon as each check is written. To keep accurate records, you need to record all information in the check register as each transaction occurs. Otherwise, the date, check number, or check amount may be recorded inaccurately. Waiting to record check information can result in difficulties with balancing bank statements when they arrive. This could also result in checks being returned to you for inadequate funds

What should you use to record transactions impacting your bank account? A. Routing numbers B. Checkbook register C. Watermarks D. Certificate of deposit

B Checkbook register. A checkbook register is a booklet in which you can write all of your checking transactions. It helps you to track how much money goes into (as deposits) and out of (as withdrawals) a given checking account. Routing numbers appear at the bottom of checks to identify a particular financial institution with the account. A watermark is an image or text impressed into paper (such as U.S. currency) that can be seen when held up to a light source. A certificate of deposit is a lending investment in which individuals lend money to a bank to earn a set rate of interest for a specified period of time.

Honest goal setting usually helps you to __________ your priorities. A. confuse B. clarify C. conceal D. complicate

B Clarify. When you spend time thinking about what goals would be appropriate for you, you clarify what is important in your life. Your goals should be based on an honest study of what you want. They must be yours, not what you think you should do or what other people want you to do. Honest goal setting would not result in confusing, concealing, or complicating your priorities.

Who is legally responsible for repaying a bank loan if the loan borrower fails to make payments as indicated in the loan contract? A. Credit union B. Co-signer C. Treasury Department D. Debt collectors

B Co-signer. When a borrower agrees to a loan, s/he is making a contractual agreement to pay back the loan in a certain manner within a specific period of time. When the borrower does not have the collateral or credit history to obtain the loan, the lender often requests that another person co-sign for the loan. A co-signer is responsible for paying back the loan if the borrower does not. The credit union, Treasury Department, and debt collectors are not responsible for repaying a loan unless they agree to be co-signers on loan contracts.

One of the benefits to some individuals of using Form 1040 to file their personal income tax is that this form enables them to A. speed up the refund process. B. deduct allowable expenses. C. claim standard deductions. D. estimate tax payments.

B Deduct allowable expenses. Form 1040 is the longest version of the tax forms. However, there are benefits to using this form depending on an individual's situation. If an individual has a lot of allowable expenses that are deductible, the individual often can reduce the amount of tax that is owed. These deductions must total more than the standard deduction in order to save money on taxes. For example, if the standard deduction is $8,000 but the individual has allowable deductions of $12,000, it is to the individual's benefit to use Form 1040 to claim the higher deduction. Using Form 1040 does not speed up the refund process or enable individuals to estimate tax payments. Individuals use Form 1040 to itemize deductions rather than to claim the standard deduction.

Because stocks in pharmaceutical companies hold their value regardless of the state of the economy, they are known as __________ stocks. A. cyclical B. defensive C. penny D. speculative

B Defensive. Because stocks in pharmaceutical companies hold their value regardless of the state of the economy, they are known as defensive stocks. Defensive stocks belong to companies whose products are necessities no matter what. Cyclical stocks are stocks whose performance is tied to the overall economy; when the economy expands, these stocks rise quickly, and when the economy contracts, they fall quickly. Speculative stocks are issued by companies that have not yet established themselves. Penny stocks are speculative stocks that sell at very low prices, usually less than $1 per share.

Chloe is preparing her income tax return for the first time. She is a receptionist, does not own any land or real estate, and has not inherited any money from a deceased relative within the last tax year. She will only be taxed on A. property. B. earnings. C. wealth. D. purchases.

B Earnings. Her employer will have kept track of her earnings and withheld the correct amount from each paycheck. She will not pay a tax on property because she does not own land or real estate. She has not inherited any money from a relative, or received a large gift of money so she will not have to pay taxes on wealth. She pays taxes on purchases when she makes those purchases, not when she prepares her income taxes.

Which of the following most accurately describes the relationship between risk and return: A. For the potential of a low return, you usually accept a high risk. B. For the potential of a high return, you usually accept a high risk. C. For the potential of a high return, you usually accept a low risk. D. For the potential of a low return, you usually accept no risk.

B For the potential of a high return, you usually accept a high risk. The statement, "For the potential of a high return, you usually accept a high risk," describes the relationship between risk and return. Higher risks usually bring higher returns. Lower risks usually bring lower returns. Every investment has some risk—none are risk-free. It would be unwise to take a high risk for something that might bring a low return. And, it is nearly impossible to find a high-return investment that requires only a low risk.

The major reason people fail to reach their goals is that they A. have a positive attitude. B. give up too soon. C. are too enthusiastic. D. want the goal sincerely.

B Give up too soon. Success is often just around the corner, but many people become discouraged and give up without reaching their goals. Enthusiasm, a positive attitude, and a sincere desire to reach a goal are all helpful in attaining goals.

Which of the following types of insurance do businesses frequently offer as part of their employee benefit plan: A. Automobile B. Health C. Property D. Liability

B Health. Many businesses offer health insurance as part of their employee benefit plan. Some businesses pay all of the premiums for their employees' coverage while others charge their employees a portion of the expense. Health insurance often is an important part of an employee's overall compensation package. Automobile, property, and liability insurance usually are the responsibility of the individual employee.

Which of the following factors is always needed for effective decision-making: A. Money B. Information C. Time D. Logic

B Information. To make effective decisions, people need information. Both relevant and irrelevant information can impact decision-making. Sometimes, decisions will be based on logic, while at other times, emotions will drive the decision-making process. Money and time are not required for all decisions.

By understanding the time value of money concept, you know that A. it is better to receive $101 a year from now than $100 today. B. it is better to receive $100 today than $101 a year from now. C. saving money can buy time on debt payment. D. time and money are related by due date.

B It is better to receive $100 today than $101 a year from now. According to the concept of the time value of money, the sooner money is received the more time you have to let it grow. Receiving money later costs you the opportunity to earn interest or other appreciation. Saving money will not buy time on debt payment. Time and money are not related by due date.

What kind of insurance protects you from loss if you let someone drive your car and that person has an accident? A. Health B. Liability C. Property D. Whole-life

B Liability. Liability insurance protects the policyholder from claims of bodily injury or property damage caused by the policyholder's vehicle. It also pays for repairs needed as a result of the accident. Health insurance helps to pay medical bills. Whole-life insurance pays the insured's beneficiaries when the insured dies. Property insurance covers losses to real and personal property.

Melinda wants to invest in a bond, but her main concern is how soon she'll be able to access the money she's invested. Melinda needs to look at the A. bid price. B. liquidity. C. yield. D. bond rating.

B Liquidity. Since liquid investments are ones in which the investor has immediate access to the invested funds, Melinda needs to look at the liquidity of her potential bond investment. The bid price is what others are willing to pay for the bond. The yield is what the bond may bring you over the time period at a certain price. The bond rating is the ranking that shows how likely it is that an issuer will repay the bond.

Commission fees associated with mutual funds are known as A. NAVs. B. loads. C. ETFs. D. expense ratios.

B Loads. Commission fees associated with mutual funds are known as loads. NAV, or net asset value, is the way to determine the price of a mutual fund's shares. ETFs are exchange-traded funds, "cousins" of mutual funds that trade like individual stocks. A fund's expense ratio is the percentage of assets used to pay for expenses.

After Mrs. Green provided the cashier with $2.50 in cash and coins, she left the grocery store with a gallon of milk. In this situation, money is being used as a A. store of wealth. B. medium of exchange. C. negotiating tool. D. bartering mechanism.

B Medium of exchange. A medium of exchange is something of value that can be used to obtain goods and services. Money is a common form of exchange. Individuals, businesses, and governments use money to purchase the products (e.g., milk) they need. When money is saved rather than spent, it is functioning as a means of accumulating wealth. Negotiating is the process of resolving a disagreement. Bartering involves trading one good or service for another good or service.

The price of a mutual fund's shares is determined by A. investment portfolio value. B. net asset value. C. liabilities. D. outstanding shares.

B Net asset value. The price of a mutual fund's shares is determined by net asset value. Investment portfolio value, liabilities, and outstanding shares are all factors used to determine net asset value. To determine net asset value, you take the total value of a fund's investment portfolio, minus its liabilities (debts or obligations), divided by the number of its outstanding shares (the number of shares the fund has issued). The answer to the equation is the price of the shares in the fund.

A mutual fund that has no limit on the number of shares it can issue or the amount of money it can hold is called a(n) A. growth fund. B. open-end fund. C. stock fund. D. closed-end fund.

B Open-end fund. A mutual fund that has no limit on the number of shares it can issue or the amount of money it can hold is called an open-end fund. A closed-end fund is a mutual fund that can only issue a set number of shares, determined before the fund is ever established. A stock fund is a fund that invests only in stocks. A growth fund is a fund that invests in stocks that are most likely to appreciate in value over the short-term.

The disadvantage to using credit cards to pay for goods and services is that you A. establish a credit rating. B. pay interest on purchases. C. earn quarterly dividends. D. defer cash payments.

B Pay interest on purchases. Credit is the arrangement by which individuals or businesses can purchase now and pay later. Many types of businesses (e.g., banks, large retailers) offer credit cards to consumers and businesses to purchase goods and services. Usually, the credit-card issuer sends the credit-card holder a monthly statement. The information on the statement includes a list of the purchases made during the billing cycle and the amount owed for the purchases, which includes the interest charges. If the credit-card holder pays the minimum amount due, the amount of interest owed accumulates on the balance due until the debt is paid off. Because interest rates can be high, this can be a disadvantage to the credit-card holder. It is important to establish a good credit rating in order to borrow money in the future from other lenders. Therefore, establishing a credit rating is not necessarily a disadvantage. Credit-card holders do not earn quarterly dividends on their credit cards. Temporary deferment of cash payment is an advantage to credit-card holders

Which of the following is generally the least expensive way to pay bills online: A. Using a bank's online bill paying service to pay your bills B. Paying your accounts at the billers' web sites C. Obtaining the services of an e-bill specialist, such as Yahoo! Bill Pay, to pay your bills D. Having a service collect and scan your bills, and then email them to you when the bills are due

B Paying your accounts at the billers' web sites. Although billers allow you to pay your bills at their web sites for free, it will take you longer to go to each biller's web site, enter your credit-card information, and pay each bill. Using the services of others to expedite bill payment will generally cost a monthly fee; however, these services will take less time to use.

What type of credit account gives the customer a credit limit at the time the account is opened and allows the customer to make payments over a period of time or to pay off the total amount due each month? A. Installment B. Revolving C. Regular D. Budget

B Revolving. With revolving credit accounts, customers receive a credit limit at the time the account is opened. The customer can pay the entire amount due at the end of the month or make payments over a period of time. Any outstanding balance is subject to interest charges. Installment credit accounts require a down payment, and the customer must sign an agreement to pay monthly installments. Regular credit accounts allow credit users to purchase goods or services during a set period. Budget credit accounts are a form of short-term credit—usually 60 to 90 days.

An overall purpose of establishing goals is to increase your chances of A. achieving immediate success. B. satisfying your wants. C. enlarging your income. D. avoiding making mistakes.

B Satisfying your wants. Clear, meaningful goals can also serve as guidelines and help you make better decisions. Enlarging your income might be a personal goal. Establishing goals cannot guarantee immediate success or the avoidance of mistakes.

Matt is balancing his checkbook for the first time. He compares the checks he has written over the last month with those listed on his statement and finds that all of his checks have cleared. Next, he verifies that his latest paycheck, which he deposited the previous day, is on the list. It is not, so he adds it to his statement balance. After this, he should A. subtract any interest. B. subtract fees and charges. C. call the bank for a new statement. D. consider everything done.

B Subtract fees and charges. To complete checkbook balancing, Matt needs to subtract fees and charges. Some financial institutions charge a monthly fee on bank accounts, especially those with less than a certain balance. They also have charges for new checks, bounced checks, etc. All of these charges must be subtracted from the balance in the check register to obtain an accurate monthly balance. Interest is added to, not subtracted from, the check register balance. Matt does not need to call the bank for a new statement just because the latest deposit is not on his current statement. He does need to subtract fees and charges and add any interest before he can consider everything done.

Why do you need to understand the role of institutions? A. To better understand how to evaluate investment opportunities B. To be better positioned to assess proposed changes to them C. To better determine who owns property rights D. To be better prepared to vote

B To be better positioned to assess proposed changes. Understanding economic institutions and the purposes they serve will help you to more effectively use institutions and to evaluate proposed new institutions or changes in the existing legal and institutional environment. Understanding the role of institutions does not affect your understanding of how to evaluate investment opportunities, determine who owns property rights, nor be better prepared to vote.

Which of the following is a variable expense that Jake must consider when developing his personal budget: A. Anticipated salary increases B. Unexpected car repairs C. Fixed car-loan payments D. Homeowner insurance premiums

B Unexpected car repairs. A budget is an estimate of income and expense for a specific period of time. Individuals develop personal budgets so they can manage their money. An expense is money that the person pays for something. A variable expense is a cost that is unexpected or may change, such as unexpected car repairs. It is a good idea to budget a certain amount of money to an emergency fund to cover unexpected, variable expenses. A salary increase is a source of income rather than an expense. Fixed expenses, such as car loans and homeowner insurance premiums, are payments that are not expected to change.

Chris is at the grocery store deciding between two very similar candy bars. One is $1.50, and the other is $3.00. He decides to buy the $1.50 candy bar because it is cheaper. Chris is using money as a ____________ to make his decision. A. medium of exchange B. unit of measure C. store of value D. commodity

B Unit of measure. Money can serve as a unit of measure to determine or compare the relative worth of different products. Chris compares the monetary value of the two candy bars and selects the less expensive one. While money does serve as the medium of exchange in this example, the fact that Chris is using money instead of some other medium of exchange does not directly impact his decision. Money would serve as the medium of exchange even if he purchases the more expensive candy bar. Store of value means that money can be held over time and still have purchasing power at a later date. The money that Chris is using is not a commodity because it does not have another use.

Which type of stock is considered a "bargain"? A. Income B. Value C. Domestic D. Growth

B Value. A value stock is considered a "bargain" because it has been overlooked by investors and is, therefore, trading at a lower-than-average price. An income stock is a stock that pays higher-than-average dividends. A domestic stock is a stock issued by a company in the country where you live. A growth stock is a stock that achieves capital appreciation rather than paying dividends.

You are more likely to achieve your goals if they are A. based on needs only. B. written down. C. long term. D. short term.

B Written down. People who have written goals accomplish 50 to 100 times more than people who do not. You are not more likely to achieve goals that are based on needs only or that are long- or short-term.

Deskin is borrowing $3,600 from his aunt at a simple interest rate of nine percent per year. Deskin's aunt expects him to repay her the principal plus interest at the end of that year. What is the maturity value of the loan? A. $3,276 B. $3,168 C. $3,924 D. $4,032

C $3,924. The maturity value of the loan is the amount of money that Deskin will need to give to his aunt at the end of the year to pay off his loan. The maturity value includes the principal and the interest. The first step in calculating the maturity value of Deskin's loan is to determine the amount of interest that Deskin will owe. To do so, multiply the principal by the interest rate and the time ($3,600 X 9% X 1 year = $324). Then, add the interest to the principal to determine the maturity value of the loan ($324 + $3,600 = $3,924).

Which of the following would be the most appropriate item to purchase with a credit card: A. Magazine B. Pack of gum C. Airline ticket D. Small pizza

C Airline ticket. Many lending institutions and retailers offer credit cards, which allow individuals or businesses to purchase now and pay later. Because credit-card holders often pay high interest rates and other fees, they must be careful when using their credit cards so they don't charge more than they can pay off in a reasonable timeframe. Using credit cards to make large-dollar purchases often makes it easier to change or cancel transactions such as airfare. In fact, many businesses prefer credit cards as a payment method. Using a credit card to purchase a pack of gum, a magazine, or a small pizza is not a good idea, especially if the transaction fee is higher than the price of the good or service.

It is wise to only set up automatic drafts to pay bills that A. you tend to pay late. B. vary from month to month. C. are the same amount each month. D. are from credit-card companies.

C Are the same amount each month. One benefit of setting up and managing your accounts online is the ability to pay your bills via the Internet. While you can technically make all of your payments individually online, it is more convenient to set up automatic drafts to pay at least some of your bills—specifically, the ones that are the same amount each month such as car loan payments and cable/satellite television bills. When the payment due varies from month to month (such as credit-card-account payments), though, you are better off paying the bill manually each month. Doing so helps you to better track your expenses and prevents you from overdrawing your account. While setting up automatic drafts could help you to pay your bills on time, you should not restrict yourself to only setting up automatic payments for bills that you tend to pay late.

Which of the following should you do first when you question the accuracy of a utility bill: A. Invite the utility company to check its reading B. Report the utility to its governing commission C. Compare the meter readings with those shown on the bill D. Call the utility company immediately to report the problem

C Compare the meter readings with those shown on the bill. Be sure to check your facts by comparing your actual meter reading with that shown on the bill. If there is a discrepancy, contact the utility company immediately, ask to speak with a supervisor, and invite the utility company to re-read the meter. If you do not receive satisfaction when you know the bill is inaccurate, then contact the utility's governing commission to report the problem.

Since John wants to know the bond's interest rate, he needs to look at the bond's A. issuer. B. maturity. C. coupon. D. par value.

C Coupon. The bond's interest rate is its coupon rate. The issuer is the corporation or governing body "issuing" the bond, or borrowing the money. The maturity date is the day when the bond will be repaid. The par value is the original amount of money borrowed.

Compounding can be described as A. meeting financial needs. B. avoiding inflation. C. earning interest upon interest. D. risking the stock market.

C Earning interest upon interest. Compounding can best be described as earning interest upon interest. There is no way to avoid inflation; one can only plan to overcome the effects of inflation with careful saving and investing. The compounding growth of the stock market is an excellent way to meet financial needs and goals, but meeting financial needs is not a description of compounding. Although there are risks in the stock market, risking the stock market does not describe compounding.

Which of the following is a financial want rather than a financial need: A. Clothing B. Food C. Education D. Shelter

C Education. Education is a financial want rather than a financial need. Financial needs are the basics that are necessary for survival. Food, clothing, and shelter are necessary for survival, but education isn't.

Which of the following is often considered one of the safest types of investments: A. Commodities B. Penny stocks C. Government bonds D. Precious metals

C Government bonds. These bonds are issued by various levels of government, from the local to the national level. Government bonds are considered one of the safest types of investments because they are backed by the government. Although government bonds do not pay high interest rates, they are safe and a good investment for individuals who cannot afford to risk losing their investment. Penny stocks are very inexpensive, but their value can go up or down quickly. Commodities and precious metals are considered high risk investments because of the fluctuations in price and value.

On a pay stub, the total amount of money that a worker has earned for the pay period before deductions is listed as A. tax-exempt income. B. net pay. C. gross pay. D. overtime income earned.

C Gross pay. Gross pay is the total income earned for the pay period before income taxes and other deductions are subtracted from the wages. Net pay is the amount of money that the worker receives after the taxes and other deductions have been subtracted from his/her wages. Tax-exempt income includes revenues that are not taxed such as tax refunds, veteran's benefits, and welfare benefits. Overtime income is the amount of money that an hourly worker earns for working more hours than s/he is normally scheduled to work.

What might a company's higher-than-usual sales volume for a day indicate? A. Investors believe the yield percentage has changed. B. Investors have received their dividends. C. Investors have reacted to news about the company. D. Investors have recalculated the PE.

C Investors have reacted to news about the company. A higher-than-usual sales volume might mean that investors have heard something about the company that they feel could affect the stock price. Receiving dividends or thoughts about the yield percentage or PE are not usually factors that would lead to a day's abnormal sales volume.

What might a dividend payout tell you about a company? A. It's reinvesting its profits back into the business. B. It's trying to rid itself of cash. C. It's a well-established company. D. It's paying back a loan.

C It's a well-established company. Typically, well-established companies are the ones that pay dividends. Companies that are still growing tend to put their profits back into their companies and, therefore, do not pay dividends. Whether or not a company is trying to rid itself of cash, or is paying back a loan, cannot be determined by the numbers in the dividend column of a stock table.

On January 3, Anna mailed her credit-card payment, which was due on January 5. The credit-card issuer received the payment on January 7. What most likely appeared on Anna's credit-card statement the following month? A. Processing charge B. Application charge C. Late fee D. Over-limit fee

C Late fee. Credit-card issuers often charge late fees for payments that do not arrive on time. Some credit-card issuers charge application fees, which involves billing a customer for applying for credit. Processing fees are charges to complete certain activities. Over-limit fees are charges applied for credit transactions that go over or exceed the credit-card holder's credit limit.

Which of the following is one of the functions of money: A. Method of investment B. System of cash C. Medium of exchange D. Process of accounting

C Medium of exchange. A medium of exchange is something of value that can be used to obtain goods and services. The most common form is money. Money is what individuals, businesses, and governments use to buy what they need and pay expenses. Money is the thing of value. It is not a system of cash, a method of investment, or a process of accounting.

While Chase was reviewing his stock performance, he saw that his commodities investment dropped .002 points from Monday's close to Tuesday's close. This drop is called the A. net worth. B. true value. C. net change. D. true yield.

C Net change. Newspapers, business publications, and web sites publish a securities or stock table, which is a format used to list stock quotes. The table helps investors monitor the performance of their stocks. The net change is a column in the table that indicates the difference between a stock's closing price and the previous day's price, which may increase or decrease (drop). True value, net worth, and true yield are not terms that describe the difference between a stock's closing price and the previous day's price.

The amount of interest you earn in a typical savings account is about A. 11 percent. B. 10 percent. C. one percent. D. 15 percent.

C One percent. The amount of interest you earn in a typical savings account is about one percent. Making 10, 11, or 15 percent would only be possible through investing

With an ownership investment, investors do which of the following: A. Collect popular items B. Buy a home to live in C. Pay for the right to own something D. Invest in multiple corporations

C Pay for the right to own something. With an ownership investment, investors pay for the right to own something. When they do this, they may buy a home to live in, collect popular items, or even invest in multiple corporations through stock mutual funds.

A stock with a price of $1 or less is known as a __________ stock. A. cyclical B. defensive C. penny D. value

C Penny. A stock with a price of $1 or less per share is known as a penny stock. Penny stocks are speculative stocks, and there is usually a good reason for their prices being so low. Defensive stocks are stocks whose performance is independent of the economy. Cyclical stocks are stocks whose performance is tied to the overall economy; when the economy expands, these stocks rise quickly, and when the economy contracts, they fall quickly. Value stocks are stocks that trade at lower-than-average prices because they have been overlooked or undervalued by investors.

Lyla is applying for a loan to buy a house for the first time. Which of the following should she be certain to do when applying for the loan: A. Sign blank documents B. Overstate her assets C. Read all paperwork carefully D. Inaccurately report her debts

C Read all paperwork carefully. Lyla should make sure she has read and understood all of the paperwork associated with the loan before signing it. She should be up front about her financial situation, so she should not inaccurately report her debts or overstate her assets. She should never sign a blank document, as doing so can lead to fraud

A formal legal agreement between a lender and a borrower usually includes a A. proposal for disbursement. B. tax code listing. C. repayment schedule. D. guarantee of eminent domain.

C Repayment schedule. Individuals and businesses usually borrow money from financial institutions for large purchases, such as business equipment. A borrower must apply for the loan with the lender and provide the lender with necessary financial status information. The lender reviews this information to determine if the potential borrower is a good risk and is likely to pay back the loan. If the lender determines that the borrower meets the necessary criteria, the application is accepted and the loan process begins. The lender develops a formal document (contract) that the borrower must sign. The document contains information regarding the loan repayment terms and schedules. The contract does not include a tax code list, a proposal (request) for disbursement, or a guarantee of eminent domain.

The following is written on the back of a check: "For deposit only; Maria Evans; Account #285655." This is an example of a(n) __________ endorsement. A. open B. general C. restrictive D. congruent

C Restrictive. Banks require checks to be endorsed before processing. Endorsement involves signing the back of the check, which allows the funds to be transferred from the check source to the payee. There are different types of endorsements. A restrictive endorsement limits how the check can be processed. In the example, the check can only be deposited to the endorser's (Maria) specified account. The check cannot be cashed or placed into another account. A general endorsement allows the endorser to cash the check or deposit it into the account of his/her choice—there are no restrictions placed on the funds transfer. Open and congruent endorsements are fictitious terms.

One way to reduce the risk of identity theft is by A. storing passwords on web browsers. B. disabling computer virus software. C. shredding old bank statements. D. photocopying credit-card receipts.

C Shredding old bank statements. One way that thieves obtain others' personal information (e.g., bank-account numbers, credit-card numbers) is by going through trash cans and dumpsters. Using a paper shredder to destroy old bank and credit-card statements makes it more difficult for thieves to obtain personal financial information. Disabling computer virus software and storing passwords on web browsers lower the computer user's security, which increases the risks associated with computer hacking. Photocopying credit-card receipts is not an action that reduces the risk of identity theft.

Which of the following factors should be subtracted from income needs when determining the amount of life insurance to purchase: A. Funeral expenses B. Cost of living increases C. Social Security benefits D. Existing debts

C Social Security benefits. Since Social Security is a source of income, you need to subtract it from income needs when determining the amount of insurance to purchase. Pensions and other sources of income would also be subtracted. When determining how much life insurance to purchase, you want to account for existing and anticipated expenses so that there is money available to cover those costs for survivors. Cost of living increases, funeral expenses, and existing and future debts would be included in your debt load that should be considered when determining life insurance needs.

To get a general idea of the direction of the stock market today, check a A. stock exchange. B. secondary market. C. stock market index. D. blue-chip company.

C Stock market index. To get a general idea of the direction of the stock market today, check a stock market index. A stock market index is a measure of average stock prices that gives a general indication of the market. Examples of stock market indices include the Dow Jones Industrial Average, the S&P 500, the NYSE Composite Index, and the NASDAQ Composite Index. A secondary market is a place where investors can trade securities that have been issued by a corporation. A stock exchange is a place (physical or virtual) where stocks are traded by brokers who represent buyers and sellers. A blue-chip company is a large, established company known for its quality and its reputation for paying dividends.

Which of the following is an example of an ownership investment: A. Money market accounts B. Certificates of deposit (CDs) C. Stocks D. Savings accounts

C Stocks. When people buy a company's stock, they are, in effect, becoming an owner of a piece of that company. Certificates of deposit, money market accounts, and savings accounts are examples of lending investments.

When preparing a personal income tax form, parents report some of their childcare expenses to receive A. dividends. B. capital gains. C. tax deductions. D. tax rebates.

C Tax deductions. Tax deductions are expenses that can be subtracted from gross income. For example, working parents can deduct or subtract a certain amount of their incomes for the childcare expenses they incur while at work. Other examples of tax deductable expenses include college tuition, home mortgage interest, and charitable donations. Capital gains are taxes on earnings from the appreciation of an investment. Dividends are a portion of a company's profits that are paid to shareholders. A rebate is a part of the price that a customer pays for a good or service, which is usually offered by the product's manufacturer.

Which of the following scenarios most likely indicates a charitable scam: A. The contribution is tax deductible. B. The fund raisers require donations be made by check. C. The fund raisers give 25% of the donations to the designated charity. D. The fund raisers establish the fair market value on used items received as donations.

C The fund raisers give 25% of the donations to the designated charity. Contributors should avoid spending money on purchases and events that benefit the fund raisers rather than the charity. The Better Business Bureau recommends that contributors should find out how much of their donations is going to the charity versus the fund raisers. It suggests that no more than 35% of the donations go to the fund raisers. Requiring donations to be made by check is a good approach to fundraising. A benefit of making charitable contributions is that the contributors can deduct the donation on their federal income tax form. The federal government allows contributors to deduct the fair market value of used items from their federal income tax rather than the original purchase price of the items.

Individuals charging only the amount they can afford to pay in full every month is an example of A. a way to avoid identity theft. B. saving money for the future. C. the wise use of credit. D. making a cash transaction.

C The wise use of credit. Credit is the arrangement by which individuals can purchase now and pay later. Many individuals have credit cards because the cards allow them to pay for purchases without using cash. Then, they receive statements on a monthly basis indicating the amount due. If individuals charge only the amount they can afford to pay in full every month, they are using credit wisely. By paying in full, they avoid interest charges which may be high and significantly increase the cost of the purchases. Charging only the amount they can afford to pay in full every month will not necessarily help individuals save money for the future. Charging only the amount they can afford to pay in full every month is not a way to avoid identity theft or an example of making a cash transaction.

Why is it important to read and reconcile bank statements? A. To withdraw excess money B. To calculate interest C. To balance an account D. To make a deposit

C To balance an account. Reconciling bank statements involves comparing the entries in a checkbook with the entries listed on the bank statement. This procedure is also known as balancing an account. The purpose is to determine the actual amount of money that is in the account. To do this, it may be necessary to add in deposits that have not been posted or subtract checks that have not cleared. If the checking account pays interest, that amount will be listed on the bank statement. It is not necessary to read and reconcile bank statements to withdraw excess money or to make a deposit.

Why is it important to start early when planning for retirement? A. To benefit from the time value of money B. To beat inflation rates C. To take advantage of compounded interest D. To ensure that protections are in place for retirement plans

C To take advantage of compounded interest. By starting early, you give your money time to grow by earning interest on interest that is added to the principal. Starting early does not help a person beat inflation rates if the investments chosen accrue less interest than the rate of inflation. The time value of money indicates that today's dollar is worth more than that same dollar a year from now due to inflation rates. Therefore, the time value of money is not a benefit for retirement planning. Starting early will not ensure that protections are in place for retirement plans. One such protection is diversification of investments.

To make sure he develops a realistic personal budget, Marcel should always A. verify his past credit rating. B. pay his bills on time. C. track and record his expenses. D. consult with a bookkeeper.

C Track and record his expenses. Realistic personal budgets involve two important considerations—income (money Marcel receives) and expenses (money Marcel spends). It is important for Marcel to track his expenses because he needs to make sure that he has enough income to pay for his bills (e.g., rent, utilities, car). To track his spending, Marcel should record his expenses in a central location so he can see bill amounts and bill due dates. Recording and keeping receipts is also important for tax reporting purposes and for tax auditing situations. Developing a realistic budget does not always involve verifying a past credit rating or consulting with a bookkeeper. Marcel should develop a budget that will support his ability to pay his bills on time.

An amount of money borrowed by an individual or a business simply by signing a promissory note is obtaining a(n) A. secured loan. B. regular credit account. C. unsecured loan. D. travel and entertainment card.

C Unsecured loan. To obtain an unsecured loan, the borrower does not pledge anything s/he owns as security to guarantee that the loan will be repaid. Instead, the borrower signs a written promise to repay the loan. Secured loans require borrowers to guarantee repayment by pledging collateral. Regular credit accounts and travel and entertainment cards are used to purchase goods and services rather than to borrow money. In addition, these credit users agree to the terms for payment, credit limits, and interest as specified by the credit provider.

The stock table column that tells you how many shares were traded that day is labeled A. YLD %. B. NET CHG. C. VOL. D. DIV.

C VOL. Vol is short for Volume (sometimes called Sales). It records how many shares were traded that day. NET CHG stands for Net Change, or the difference between the closing price and the previous day's price. DIV is short for dividend, which is a portion of a company's profits, paid to shareholders each year. YLD% stands for Yield Percentage, which is determined by dividing the dividend into the current stock price.

If individuals are not self-employed, which of the following is a type of earned income they might receive: A. Interest and dividends B. Child support income C. Vacation pay D. Trust disbursements

C Vacation pay. If individuals receive paid vacation, they are being reimbursed for work done. Child support income is unearned because it is court-ordered. Interest and dividends are unearned because an individual is not required to work for them. Trust disbursements also qualify as unearned income because no work is done to receive them.

A fund that invests in stocks that tend to be undervalued or overlooked is called a A. blend fund. B. growth fund. C. value fund. D. sector fund

C Value fund. A fund that invests in stocks that tend to be undervalued or overlooked is called a value fund. Value fund managers choose stocks they think will appreciate in value over the long-term. A growth fund is a fund that invests in stocks that are most likely to appreciate in value over the short-term. A blend fund is a stock fund that contains both growth and value stocks. A sector fund is a fund that invests in stocks from one specific industry, such as oil. SOURCE: PD:304

When Jeremy develops his personal budget, he should categorize the money that he spends on food, clothing, and entertainment as A. relational outflows. B. fixed costs. C. variable expenses. D. periodic investments.

C Variable expenses. A budget is an estimation of income and expenses. Developing a personal budget helps individuals better manage their money. Variable expenses are expenses that change from month to month, such as food, clothing, and entertainment expenses. Fixed expenses are expenses that do not change every month, such as rent and loan payments. Relational outflows and periodic investments are not budgetary categories.

Mutual funds that contain both stocks and bonds are known as A. exchange-traded funds. B. index funds. C. money market funds. D. balanced funds.

D Balanced funds. Mutual funds that contain both stocks and bonds are known as balanced funds. Exchange-traded funds are "cousins" of mutual funds that trade like individual stocks. Money market funds invest in a variety of different securities that provide relatively higher rates of return over the short-term. Index funds are a unique type of stock mutual fund that copy the performance of a particular stock market index, such as the Standard and Poor's 500 (S&P 500) or the Nasdaq 100.

Meredith's gross pay per pay period is $1,800. Calculate Meredith's net pay if she owes 25% in federal income tax, and 6.2% Social Security tax, and 3% state tax. A. $1,154.40 B. $1,094.40 C. $1,014.40 D. $1,184.40

D $1,184.40. Gross pay is the total income earned for the pay period before income taxes and other deductions are subtracted from the wages. Net pay is the amount of money that the worker receives after the taxes and other deductions have been subtracted from his/her wages. To determine Meredith's net pay, first calculate the dollar amounts of her tax obligations by multiplying her gross pay by each of the tax percentage rates ($1,800 X .25 or 25% = $450; $1,800 X .062 or 6.2% = $111.60; $1,800 X .03 = $54.00). Then add together all the tax dollar amounts and subtract that number from Meredith's gross pay to obtain her net pay ($450 + $111.60 + $54.00 = $615.60; $1,800 - $615.60 = $1,184.40.

Which of the following documents could you use as a new hire to establish your eligibility to work in the United States and your identity: A. Voter's registration card B. A state-issued driver's license C. A school ID with photograph D. A U.S. passport

D A U.S. passport. New hires are required to provide some form of documentation proving that they are both eligible to work in the United States and that they are who they say they are. Documents accepted for these purposes by employers include a Permanent Resident Card or Alien Registration Receipt Card, an expired or unexpired U.S. passport, an unexpired foreign passport with a temporary I-551 stamp, an unexpired Employment Authorization Document containing a personal photograph, or an unexpired foreign passport with an unexpired Arrival-Departure record. A state-issued driver's license, a school ID with photograph, and voter's registration card establish who you are but do not address your eligibility to work in the United States.

One advantage to setting attainable goals is that you A. can picture it in your mind. B. can measure your progress. C. work harder to achieve a very high goal. D. are less likely to become discouraged.

D Are less likely to become discouraged. Attainable goals are realistic and within reach, so one advantage to setting attainable goals is that you are less likely to become discouraged. Attainable goals will not make you work harder to achieve a very high goal—very high goals do not fit the definition of attainable. Being able to picture a goal in your mind is the result of setting a specific goal, not necessarily an attainable one. Being able to measure your progress is the result of setting a measurable goal, also not necessarily an attainable one.

An advantage to businesses of offering credit is that credit customers A. buy few impulse items. B. buy less readily than cash customers. C. can often save money on purchases. D. are not as price-conscious as cash customers.

D Are not as price-conscious as cash customers. Credit encourages customers to buy regardless of price because they know they don't need to worry about whether they have cash on hand to pay for their purchases. Credit customers are likely to buy impulse items that catch their attention, larger quantities, or more expensive models. Credit customers often have more chances to save money through advance notices of special sales, but that is an advantage to the customers, not to the businesses.

To encourage people to donate their blood, blood banks began paying blood donors. Surprisingly, the amount of blood donated dropped to half what it had been. Why would this have happened? A. Blood banks failed to consider donors' financial self-interest. B. Blood donors felt their blood was worth more than they were being paid. C. Blood donors were acting in their own best interest. D. Blood banks failed to consider donors' ethical motivations.

D Blood banks failed to consider donors' ethical motivations. When businesses offer incentives, they need to think about aligning their customers' financial self-interests with their ethical motivations. Blood donors stopped giving blood because being paid undermined their moral sentiments that giving blood was the right thing to do. When offering economic incentives, businesses must try to align them with what customers view as ethical. By donating blood, donors felt that they were viewed as a certain type person—one who is giving. Being paid for blood went against what donors considered was ethically correct. The blood donors were not objecting to the amount they were being paid. In this case, giving blood was viewed as acting in the best interest of others, rather than of the blood donors. The blood banks did consider donors' financial self-interest by offering to pay them for their blood.

Robyn bought $100 worth of stock in a company, and now it's worth $150. This is an illustration of A. a stock split. B. dividends. C. a stock exchange. D. capital appreciation

D Capital appreciation. Robyn's story is an illustration of capital appreciation. Capital appreciation is an increase in the price of the stock you own. Robyn's stock is now worth more than what she paid for it. A stock exchange is a place (physical or virtual) where stocks are traded by brokers who represent buyers and sellers. A stock split is the division of a corporation's existing stock into multiple shares. Dividends are sums of money paid to investors as earnings on their investments.

Caitlin has three credit cards. She receives her credit-card statement for one of the cards and has to decide how to pay the $500 she spent with that card. To pay the least for use of the credit, she should pay with __________ and make the __________ payment. A. another card; minimum B. cash; minimum C. another card; full D. cash; full

D Cash; full. Paying the statement in full will assure that she does not have to pay extra interest on the balance, and will help improve her credit history. Paying in cash is better for her credit history's health than paying with another card, because eventually she will have to pay the money owed on the other card. Paying for one card with another can lead to a downward spiral of credit card debt.

Which of the following is a common error found on credit-card bills: A. Charges for credits earned from using the credit account for purchases B. Charges for payments made to the account C. Charges for purchases made on the account D. Charges for returned items that have not been credited to the account

D Charges for returned items that have not been credited to the account. It always pays to verify the accuracy of charges on credit-card bills. Occasionally, credit-card companies send out customers' bills before they are notified that items have been returned to the stores. If customers fail to monitor their bills, they will pay more than necessary, thereby tying up their money and losing interest that could have been earned if the excess money had remained in their bank accounts. Charges for purchases made on the account are legitimate. Some customers earn credits for using their credit accounts for purchases—they are not charged for the credits. Accounts are credited for payments made to them rather than there being charges.

Reconciling a personal bank statement is the process of determining any differences between the bank statement balance and the A. deposit slips. B. balance sheet. C. canceled checks. D. checkbook balance.

D Checkbook balance. Reconciling a bank statement is the process of determining any differences between the bank statement balance and the checkbook balance. A company's balance sheet is not part of maintaining a personal bank account or its records. Canceled checks and deposit slips are used during bank-statement reconciliation to determine if accurate records have been kept.

Governments pay for public services such as police protection, road repairs, and public education by A. regulating the business cycle. B. mandating donations. C. establishing embargoes. D. collecting taxes.

D Collecting taxes. All levels of government collect taxes from individuals and businesses. The taxes are used to pay for different types of public services such as police protection, road repairs, and public education. Donations are given rather than mandated. Embargoes are actions that suspend trade with another country and are used for political reasons or during hostilities. Government policies are one of many factors that influence the ebb and flow of the business cycle; however, there are aspects of the business cycle that cannot be regulated.

Pedro received a check in the amount of $432.87 from the Tabor Corporation, a company in which he is a stockholder. This source of income is referred to as A. inheritance. B. wages. C. interest. D. dividends.

D Dividends. Individuals and businesses acquire income in many ways. Dividends are earnings that are paid to investors or stockholders for their investments. When Pedro purchased shares of Tabor stock, he became an owner of the company. As an owner of the company, Pedro has the opportunity to earn a percentage of the company's profits, which are paid to him in the form of dividends. Wages are the income that workers earn for the work that they perform. Interest is the reward or cost of lending or borrowing money, usually figured as a percentage of the amount borrowed. An inheritance is the assets (e.g., property, goods, money) that a person leaves to others upon his/her death.

Why is estate planning important? A. Keeps your assets from going through probate court B. Maximizes the amount of money that goes to foundations C. Encourages you to develop financial goals D. Ensures that your assets are divided the way you want them to be

D Ensures that your assets are divided the way you want them to be. Estate planning gives you the opportunity to determine who will get your assets when you die. It also designates how much each beneficiary will receive from the estate. Effective estate planning will keep your beneficiaries from having to pay estate taxes, thereby maximizing the amount of money that they inherit. Foundations would only receive your assets if they have been designated as beneficiaries. Retirement planning, rather than estate planning, encourages you to develop financial goals. To avoid probate court, your assets would have to be put into a trust. Just having a will does not keep your beneficiaries out of probate court.

Which of the following factors should be included when determining life insurance needs: A. Consumer Price Index B. Past income of the insured C. Cost of insurance coverage D. Expected future expenses

D Expected future expenses. Since one purpose of life insurance coverage is to reduce the financial impact of a person's death on her/his survivors, the person needs to think both short and long term. The individual needs to think about the future expenses that the survivors will encounter. An example is college tuition. When determining life insurance needs, a person needs to consider present and future potential income rather than past income. The cost of insurance is not factored into determining how much life insurance is needed. Instead, the cost of insurance is based on the amount and type of coverage obtained. The Consumer Price Index is an economic indicator of consumer purchasing power that is determined by comparing current costs of goods and services to those of a selected base year. This measure is based on current and historical costs rather than future costs.

Which of the following is a cost of credit: A. Rebates B. Discounts C. Fidelity bonds D. Finance charges

D Finance charges. Finance charges are the interest charged on credit accounts which are not paid in full at the end of each month. Discounts are cash deductions which are often provided as an incentive for early payment of an account. Fidelity bonds are a type of insurance that protects businesses from losses due to employee theft. A rebate is a return of part of the price a customer pays for a good or service, usually offered by the manufacturer of the good.

Which of the following helps individuals select the type of life insurance to buy and the most appropriate investments: A. Local bank managers B. Certified public accountants C. Trust departments D. Financial planners

D Financial planners. There are many types of financial planners who help clients develop investment plans and prepare for the future. These planners provide financial services such as recommending and selling life insurance, mutual funds, stocks and bonds, etc. Part of what they do is provide advice on how their clients can achieve their financial goals. Certified public accountants, trust departments, and local bank managers usually do not help individuals select the type of life insurance to buy and the most appropriate investments.

What is an example of good debt? A. Putting zero down on a home loan B. Using credit cards to pay for a family vacation C. Leasing a car that you plan to keep for at least 10 years D. Having your children take out loans for college

D Having your children take out loans for college. Rather than using their retirement savings to pay for college loans, parents should save what they can for their children's college fund, and then have their children take out loans to pay for the difference. Credit cards should not be used to pay for short-term activities unless the amount can be paid off when the credit card bill comes in. Car leases are good to use for cars that will be kept three or four years—not 10 years. The mortgage crisis occurred because many people who were unable to repay their loans were given loans at zero percent down. This will make the monthly mortgage rate quite high. Generally, financial institutions want a down payment of 20 percent.

Why should you consider the consequences associated with possible options before making a final decision? A. Discourages others from questioning your final decision B. Ensures that all possible options have been identified C. Enables you to reach a decision that satisfies everyone involved D. Helps to avoid future problems associated with the decision

D Helps to avoid future problems associated with the decision. By carefully thinking through the consequences that might result from various options, you can select a final decision that has the fewest future problems associated with it. You can select the option with the best possible outcome. Assessing consequences does not guarantee that all options have been identified nor does it mean that your decision will satisfy everyone. Even when you carefully think about consequences associated with your decision, you can still have your decision questioned by others.

A business advertised new-product financing with a 10 percent down payment and a low interest rate with monthly payments spread over four years. What type of loan was the business offering? A. Revolving credit loan B. Single payment loan C. Cash payment D. Installment loan

D Installment loan. Loans that must be paid back in regular installments over a certain amount of time at a specified rate of interest are installment loans. They are frequently used to purchase costly items, such as automobiles, furniture, and appliances. Single payment loans are loans that must be paid off in a lump sum at a designated time in the future, possibly three months. Revolving credit loans are loans that are repaid on a regular basis in at least the minimum required amount. Cash payments are made for the full amount at the time of purchase.

Which of the following is a true statement about stock information resources: A. It is very difficult to find stock information. B. There are very few stock information sources. C. Only wealthy investors have access to stock information. D. It has never been easier to find stock information.

D It has never been easier to find stock information. A few short years ago, only professionals and wealthy investors had access to in-depth stock information. Now, there is a great deal of easy-to-find information, all available to the individual investor.

Which of the following types of insurance is intended to provide an income to an employee's dependents: A. Collision B. Medical C. Home D. Life

D Life. Life insurance is intended to provide an income to an employee's dependents if the employee dies. An employee purchases life insurance in order to guarantee that surviving dependents will have sufficient income to maintain their standard of living. Some businesses offer life insurance as part of their benefit plan, but in most cases employees must obtain their own life-insurance policies. Medical, home, and collision insurance are not designed to provide an income to an employee's dependents.

It's a good idea for an investor to watch the numbers on a stock table A. when dividends are paid. B. just for a given day. C. once a year. D. over a period of time.

D Over a period of time. Watching numbers over a period of time is a good idea because investors can get a sense of what is normal for a stock price. Looking at the numbers once a year, on a given day, or when dividends are paid does not give you enough time to obtain this kind of information.

What is a guideline to follow when completing a loan application? A. Use overly large letters to make the application easy to read. B. Use all uppercase letters when completing online applications. C. Leave questions blank when they don't apply to you. D. Present yourself in a positive light but be honest.

D Present yourself in a positive light but be honest. Your loan request will be denied if the lender finds out that you provided false information on the application; therefore, honesty is the best policy when applying for loans. You can present yourself positively by writing notes or comments to clarify questionable points on the application. Online applications should be completed with upper and lower case letters. All questions should be answered. If a question does not apply to you, write N/A on the form. Use of overly large letters will cramp the information into the spaces provided, thereby making it difficult to read the completed application.

Which of the following elements are needed to determine the future value of money that is placed in a savings account for one year: A. Interest rates and annual income B. Quarterly wages and principal amount C. Late fees and insurance rates D. Principal amount and interest rate

D Principal amount and interest rate. When people keep their money in a financial institution (e.g., bank), they earn interest on the amount (principal) that they put into the account. The interest is paid to the customer's account by the financial institution. Over time, the customer earns money on the principal by accumulating interest, which increases the future value of the savings account. To calculate the future value of the savings account, it is necessary to know the principal amount, the interest rate, and the length of time that the principal is in the account. Quarterly wages, late fees, annual income, and insurance rates are not elements that will help a person calculate the future value of money in a savings

Financial planning can be described as a way to A. retire with a million dollars by the time you're age 40. B. remove the fun from saving and investing. C. make it all right to treat yourself. D. realize what it takes to get the things you really want.

D Realize what it takes to get the things you really want. Financial planning is a good way to realize what it takes to get the things you really want. It is not a method for removing the fun from saving and investing, nor does it make it all right to treat yourself to something special. And, even the best financial planning can't guarantee you'll retire with a million dollars by the time you're age 40.

Ben has just finished college and has moved into his own apartment that is located on a bus line. He'll be able to take the bus to his new job at the TOPS Cereal Company, where he's scheduled to start in a month. In fact, he'll need to rely on bus transportation until he saves money to buy a car. What insurance coverage should he have? A. Auto insurance and temporary short-term health insurance B. Health and life insurance C. Renter's insurance and COBRA D. Renter's insurance and temporary short-term health insurance

D Renter's insurance and temporary short-term health insurance. Although Ben has not started his new job, he should obtain renter's insurance to protect his belongings in the apartment. Since he hasn't started his job yet, he should get temporary health insurance that would provide coverage from 1-12 months. Health insurance will probably be provided by Ben's employer (TOPS Cereal Company) once he starts working. Auto insurance is not needed since he will be using bus transportation. COBRA is short-term group coverage that individuals can obtain when they're between jobs. They're, in effect, continuing their coverage with their previous employer. No information was provided as to whether Ben had prior employment.

Kevin bought a refrigerator at a home-improvement store. When it was delivered to his home, he discovered that there were faulty parts. Which of the following should he do first: A. Take legal action B. Contact the home-improvement store's headquarters C. Seek an arbiter D. Return to the place of purchase

D Return to the place of purchase. Most merchants are eager to work with customers to resolve disputes about sales. This is also the remedy that consumes the least amount of time. If the dispute is not resolved, his next step should be to contact company headquarters and speak to someone there. If the dispute is still not resolved, then he should seek a third party to arbitrate the situation. If all of these steps fail, he should take legal action against the home-improvement store.

A critical aspect of financial planning involves A. setting broad financial goals. B. obtaining several credit cards. C. investing money in high-risk securities. D. saving money for unexpected situations.

D Saving money for unexpected situations. Financial goals are objectives measured in terms of money. Setting financial goals involves financial planning, which is the determination of how to achieve the financial goals. An important aspect of financial planning involves saving money for unexpected situations. Saving money for unexpected situations provides you with funds to pay your bills if you are unable to earn an income for some reason, such as job loss or illness. Obtaining and using several credit cards is problematic if you cannot pay the balances due in a timely manner. The level of investment risk depends on many factors including the individual's comfort level with risk, income level, and age. Financial goals should be specific rather than broad.

What is a tip to aid in paying bills on time? A. Notify businesses to let them know that time extensions will be needed. B. Pay bills as soon as they arrive. C. Require businesses to use direct deposit into your account. D. Set aside two times a month to pay bills.

D Set aside two times a month to pay bills. By establishing a schedule for bill paying, you can help yourself pay your bills on time. Generally, paying bills at the middle and the end of each month is an effective schedule to follow. Paying bills as soon as they arrive results in lost interest that could be earned on your money. Many businesses offer customers the option of having the amount of their monthly bills directly deposited into the businesses' accounts rather than the businesses making deposits into customer accounts. Notifying businesses that you will be late making your payments will not keep the businesses from charging late fees on your bills.

Valerie is developing a personal budget for the first time. Which of the following is the first step she should take: A. Adjust her debt payments B. Know her income C. Estimate her fixed expenses D. Set her financial goals

D Set her financial goals. Valerie should first figure out what amount she would like to have at her disposal in the short-term, say next year, and then in the long-term, or about five years from now. Then she should look at her income, expenses, and debt payments to figure out where she can afford to decrease her spending in order to reach her financial goals.

To obtain reliable information about securities, a potential investor might speak with a A. loan officer. B. trusted friend. C. colleague. D. stockbroker.

D Stockbroker. Securities refer to the legal owning or lending agreements between individuals, businesses, or governments. Securities include investments such as stocks, bonds, and mutual funds. A stockbroker is a licensed person who has the authority and expertise to buy and sell securities on behalf of a client. Unless they are stockbrokers, trusted friends, colleagues, and loan officers may not be the most reliable sources of securities information.

What is the best long-term investment for coping with volatile financial markets? A. Certificates of deposit B. Bonds C. Treasury bills D. Stocks

D Stocks. Volatile financial markets are best addressed with stock investments because the rate of return on stocks, in the long term, have historically been better than the returns on bonds and treasury bills. Certificates of deposit are savings instruments rather than investments. The rate of return on CD's is stable but lower than that of the return on stocks.

Form 10-K is most like A. the cash flow statement. B. Form 10-Q. C. the bottom line. D. the annual report.

D The annual report. Form 10-K is the annual report that a company must file with the SEC. It is less attractive than the annual report that companies send to their shareholders. Form 10-Q is a quarterly report. The bottom line and cash flow statements appear in 10-Ks.

Which of the following is a benefit of whole-life insurance: A. It has lower premiums than term insurance. B. It combines death benefits with a savings plan. C. The policyholder earns interest at current rates. D. The policyholder can borrow the policy's cash value.

D The policyholder can borrow the policy's cash value. A whole-life insurance policy builds cash value as the policyholder pays premiums at regular intervals. If, at some point, the policyholder needs a loan, s/he can borrow the cash value of the policy. Universal life insurance combines death benefits with an investment and savings plan that earns interest at current market rates. Whole-life insurance rates are higher than term insurance rates because term insurance only pays death benefits if the policyholder dies during the set period of time covered by the policy.

Why should you spell out the check amount when completing checks? A. The spelled out check amount gives the purpose for the check. B. The spelled out check amount verifies who can cash the check. C. The spelled out check amount specifies the bank's routing number. D. The spelled out check amount is used if the numbers are unclear.

D The spelled out check amount is used if the numbers are unclear. The spelled out check amount is relied on when the bank or check recipient cannot easily decipher the numbers recorded on the check. The "Pay to the order of" line identifies who can cash the check. The bank's routing number appears in the MICR line at the bottom of your check. The memo line is used to designate the check's purpose.

How do limited resources impact self-discipline in money management? A. They require you to use the latest technology to manage your money. B. They require you to obtain the highest interest possible on your money. C. They require you to avoid risk. D. They require you to make choices about whether to save or spend your money.

D They require you to make choices about whether to save or spend your money. Since you have limited financial resources, you have to make choices about how to use your money. It takes self-discipline to save money rather than spend it to get what you want immediately. Limited resources do not require you to avoid risk; however, you should take informed risks so that you can grow your limited resources faster than would be possible if risk were avoided. Use of the latest technology in money management is not required. Although you'd prefer to earn the highest interest possible on your money, this is not a requirement due to limited resources.

A step in choosing a goal is selecting a __________ for the goal. A. daily schedule B. substitution C. vague reason D. time limit

D Time limit. Setting a time limit in the beginning means you are less likely to put off your efforts to reach the goal. Having a substitute for the goal would tend to reduce the focus on the real goal and perhaps prevent its achievement. Not every goal can be pursued on a daily scheduled basis. If only vague reasons are given for the goal, there will not be sufficient determination to achieve it.

As a recent college graduate, you want to support your school financially with a donation. However, your income barely covers your monthly expenses and college loans. What would be the least expensive way for you to make a donation to your college? A. Purchasing books, mugs, or school apparel from the college's online bookstore B. Budgeting a monthly amount for donation to the school C. Mailing box tops to manufacturers who will donate a flat amount to the school D. Using your college's affinity credit card to make purchases

D Using your college's affinity credit card to make purchases. Many university alumni associations have linked up with banks to provide affinity credit cards. When these cards are used to make purchases, banks donate a small amount to the college with which the bank has the affinity credit-card program. This approach to charitable giving will not cost you anything; therefore, it is a good option for people with limited funds. Purchasing books, mugs, or school apparel from the college's online bookstore is not considered charitable donations. Although mailing box tops to manufacturers is an inexpensive way to make donations, it costs to mail the box tops to the manufacturers. Budgeting a monthly amount for the donation is a good way to build a donation; however, it requires a monthly outlay of money that you may not have at this point in your life.

Which of the following is an example of processing a transaction with a debit card: A. Jayden purchased a new video game from Great Deal Electronics using a store-issued card given to him by his grandfather. B. Tyler provided his card number and expiration date to the online-travel agency so he could obtain his airline tickets now and receive his bill for the tickets later. C. After Ava finished her meal at an upscale restaurant, she presented the server with a card that provided Ava with a special discount off her bill. D. When Naomi purchased office supplies, she presented the cashier with a card that automatically withdrew funds from her business's checking account.

D When Naomi purchased office supplies, she presented the cashier with a card that automatically withdrew funds from her business's checking account. A debit card is a common method of payment for goods and services. Issued by financial institutions (e.g., banks), a cardholder scans the card into a machine at the point of sale. The information is transmitted to the appropriate location, and the funds are electronically transferred from the cardholder's checking or savings account to the seller's account. Credit is the arrangement in which businesses and individuals can purchase now and pay later. Individuals and businesses can obtain the goods and services that they need right away, such as airline tickets, and then pay for the tickets when they receive their statements from their lending institutions. Some businesses offer membership or customer-loyalty cards, which provide their members or customers with product discounts. Gift cards are store-issued vouchers that a gift giver can purchase for another person to use to buy the store's products.