The financial decision-making process is complicated by all of the following factors EXCEPT
Question 1 options:
A)
uncertainty and risk.
B)
the use of information in planning.
C)
the relative importance of consequences.
D)
the number of factors to consider.
E)
the complexity of relationships among factors.
If you are risk averse, then you do not have enough
Question 2 options:
A)
wealth or surplus to invest.
B)
knowledge to invest with confidence.
C)
time before you need your money for expenses.
D)
a. and b.
E)
a., b., and c.
A good credit rating would be based on all the following criteria EXCEPT
Question 3 options:
A)
you depend on credit for regular expenses.
B)
you have used credit appropriately in the past.
C)
you can afford to take on more credit.
D)
you have little or no current debt.
E)
you have a record of paying what you owe on time.
The percentage of fund assets that are replaced in a year is the fund’s trading activity expressed as
Question 4 options:
A)
the expense ratio.
B)
the turnover ratio.
C)
the 12b-1 fee.
D)
the dividend distribution.
E)
the capital gains distribution.
Your time horizon for financial planning is
Question 5 options:
A)
lifelong.
B)
the five-year plan.
C)
the time it takes to set goals.
D)
approximately 65 years.
E)
the time it takes to realize goals.
When you invest in an exchange-traded fund you invest in
Question 6 options:
A)
a mutual fund.
B)
a fund traded like a share of stock.
C)
an index fund.
D)
a. and b.
E)
a., b., and c.
Perhaps the most critical information to have about an investment is its
Question 7 options:
A)
potential return.
B)
susceptibility to types of risk.
C)
asset value.
D)
a. and b.
E)
a., b., and c.
The costs of car ownership include
Question 8 options:
A)
the down payment.
B)
financing costs.
C)
opportunity and liquidity costs.
D)
a. and b.
E)
a., b., and c.
To estimate required savings, you need to estimate
Question 9 options:
A)
the return on your savings in retirement.
B)
how long you will be retired before you die.
C)
what your expenses will be in retirement.
D)
a. and b.
E)
a., b., and c.
Which of the following measures is a way to avoid becoming the victim of an unscrupulous vendor or scam artist?
Question 10 options:
A)
Second opinions
B)
Verification of identity or certification
C)
Written estimates
D)
a. and b.
E)
a., b., and c.
By buying shares in mutual funds, you
Question 11 options:
A)
achieve diversification at lower transaction cost.
B)
receive the benefit of professional expertise.
C)
opt for passive portfolio management.
D)
a. and b.
E)
a., b., and c.
Examples of price advantages include all the following EXCEPT
Question 12 options:
A)
seasonal or expiration date discounts.
B)
brand or label discounts.
C)
price discrimination.
D)
discounts on excess inventory.
E)
volume or quantity discounts.
In financial planning, analyzing costs, benefits, and risks
Question 13 options:
A)
helps you to choose alternatives.
B)
allows you to establish a budget.
C)
prevents you from making bad decisions.
D)
reveals shortcuts to reaching your goals.
E)
forces you to defer some goals.
With a line of credit you can
Question 14 options:
A)
borrow money as needed, up to a limit.
B)
pay down each loan as desired.
C)
pay interest only on the outstanding balance.
D)
a. and b.
E)
a., b., and c.
A health insurance policy that covers physician expense, surgical expense, and hospital expense is called
Question 15 options:
A)
major medical insurance.
B)
basic insurance.
C)
a formulary.
D)
dental and vision insurance.
E)
group health insurance.
Retirement planning involves
Question 16 options:
A)
defining your goals.
B)
saving for the time when you will not have income from employment.
C)
estimating how much savings you will need to retire when you want.
D)
a. and b.
E)
a., b., and c.
Future incomes and expenses can be projected for quantity and price on the basis of
Question 17 options:
A)
probability.
B)
volatility.
C)
predictability.
D)
a. and b.
E)
a., b., and c.
Factors that lenders look at to evaluate borrowers include
Question 18 options:
A)
your current debts and PITI calculation.
B)
your income and employment.
C)
your credit history and credit score.
D)
a. and b.
E)
a., b., and c.
Derivative contracts
Question 19 options:
A)
include future and forward contracts.
B)
are time-sensitive with an expiration date.
C)
depend on the value of commodities.
D)
a. and b.
E)
a., b., and c.
Lenders determine their risk by assessing
Question 20 options:
A)
the five C’s.
B)
your credit score.
C)
the prime rate.
D)
a. and b.
E)
a., b., and c.
Your auto insurance premium may be reduced if
Question 21 options:
A)
you pass a driver education course.
B)
you live in an accident-prone or high crime area.
C)
you have had an accident in the past three years.
D)
a. and b.
E)
a., b., and c.
The U. S. government’s retirement account, Social Security, is funded by
Question 22 options:
A)
a mandatory payroll tax.
B)
both employers and employees.
C)
your income taxes.
D)
a. and b.
E)
a., b., and c.
Your PITI plus other debt should be what percent of your gross annual income?
Question 23 options:
A)
38%
B)
33%
C)
25%
D)
50%
E)
15%
Mortgage-backed securities are not good real estate investments for individual investors because they are
Question 24 options:
A)
difficult to price.
B)
vulnerable to economic cycles and default risk.
C)
in real estate financing rather than real estate.
D)
a. and b.
E)
a., b., and c.
Your prime directive as a consumer is to
Question 25 options:
A)
live within your means.
B)
avoid buyer’s remorse.
C)
shop for bargains.
D)
a. and b.
E)
a., b., and c.
Financial management is significantly influenced by
Question 26 options:
A)
microeconomic factors.
B)
macroeconomic factors.
C)
personal factors.
D)
a. and b.
E)
a., b., and c.
The most common uses of debt by consumers are
Question 27 options:
A)
college loans.
B)
car loans and home mortgages.
C)
personal loans.
D)
a. and b.
E)
a., b., and c.
As a car owner you can maximize the benefits you enjoy by
Question 28 options:
A)
following the owner’s manual.
B)
maintaining a valid driver’s license.
C)
registering and insuring the car.
D)
a. and b.
E)
a., b., and c.
You decide you want to have a million dollars in the bank when you retire. Your bank pays 3% interest per year. If you start when you are 28, how much would you need to save each year to reach your goal by the time you are 68, assuming the interest rate stays the same?
Question 29 options:
A)
Between $24,000 and $26,000 a year.
B)
Between $15,000 and $16,000 a year.
C)
Between $19,000 and $20,000 a year.
D)
Between $10,000 and $11,000 a year.
E)
Between $13,000 and $14,000 a year.
The Consumer Price Index is a measure of
Question 30 options:
A)
recession.
B)
consumption.
C)
inflation.
D)
GDP.
E)
purchasing power.
A 401k plan
Question 31 options:
A)
has a maximum contribution limit.
B)
is a tax-deferred plan.
C)
is a portable plan.
D)
a. and b.
E)
a., b., and c.
Property factors that determine the amount of property insurance premiums include
Question 32 options:
A)
the age and size of the house.
B)
the location and proximity to a hydrant.
C)
the number of occupants.
D)
a. and b.
E)
a., b., and c.
Optional enhancements that lower risks and reduce premiums include all the following EXCEPT
Question 33 options:
A)
burglar alarms.
B)
electrical upgrades.
C)
fire extinguishers.
D)
deadbolt locks.
E)
smoke detectors.
The cash budget’s greatest value is in clarifying
Question 34 options:
A)
recurring incomes and expenses.
B)
free cash flows for capital expenditures.
C)
risks and choices in the timing of cash flows.
D)
attainable short-term goals and lifestyle goals.
E)
the importance of cash management tools.
Your credit score is determined primarily on the basis of
Question 35 options:
A)
how long you have been using credit.
B)
the types of credit issued to you.
C)
your credit history.
D)
your current debt.
E)
your character.
The future value of an annuity increases when
Question 36 options:
A)
the present value increases.
B)
the time value increases
C)
the rate of compounding increases
D)
a. and b.
E)
a., b., and c.
Investor constraints include all the following EXCEPT
Question 37 options:
A)
legal requirements.
B)
tax obligations.
C)
time horizon.
D)
liquidity needs.
E)
level of debt.
When you invest in an index fund you invest in
Question 38 options:
a mutual fund.
a fund reflecting the performance of similar securities.
a fund managed by a company, brokerage, or bank.
a. and b.
a., b., and c.
The Joneses believe it is important to try to reduce poverty and hunger globally by aiding local communities. They invest internationally in local businesses and nonprofit organizations that are effectively addressing the problem. Their strategy is an example of
Question 39 options:
A)
divestment.
B)
legal constraints.
C)
unique circumstances.
D)
risk tolerance.
E)
social investment.
Future capital expenditures can be projected on the basis of
Question 40 options:
A)
financial history.
B)
recurring incomes.
C)
the time value of money.
D)
a. and b.
E)
a., b., and c.
When you invest in bonds you
Question 41 options:
A)
loan money and receive interest
B)
receive repayment of principal at maturity.
C)
borrow money and pay interest.
D)
a. and b.
E)
a., b., and c.
The study of risk and prediction of outcomes is based on
Question 42 options:
A)
the dynamics of probability.
B)
the study of behavioral finance.
C)
the uncertainty of independent events.
D)
a. and b.
E)
a., b., and c.
When you invest in stocks you
Question 43 options:
A)
pay dividends.
B)
sell equity for liquidity.
C)
buy a share of a corporation.
D)
a. and b.
E)
a., b., and c.
Alex realizes from his balance sheet that he could be facing personal bankruptcy within the year. He can prevent this from happening by
Question 44 options:
A)
liquidating assets to pay creditors.
B)
achieving positive net worth.
C)
refinancing debt on different terms.
D)
a. and b.
E)
a., b., and c.
The higher the lender’s risk, then
Question 45 options:
A)
the lower your cost of debt.
B)
the lower your interest rate risk.
C)
the higher your cost of debt.
D)
the higher your interest rate risk.
E)
the lower your default risk.
Electronic options for withdrawals or payments include
Question 46 options:
A)
automatic payments.
B)
debit and ATM cards
C)
direct deposits.
D)
a. and b.
E)
a., b., and c.
You can negotiate all the following factors with car dealers, affecting the value of your purchase, EXCEPT
Question 47 options:
A)
the price.
B)
the manufacturer’s rebate.
C)
service discounts on maintenance.
D)
the dealer’s warranty terms.
E)
the trade-in value of your old car.
Mutual funds provide investors with
Question 48 options:
A)
diversification.
B)
security selection.
C)
asset allocation.
D)
a. and b.
E)
a., b., and c.
Returns from a mutual fund are returns on the securities it owns, including distributions of
Question 49 options:
A)
interest.
B)
dividends.
C)
capital gains.
D)
a. and b.
E)
a., b., and c.
